Markets & Finance

Witching Hour

June 13, 2001

By Paul Cherney These two points still represent the essence of why upside is probably limited in the short-term: 1) Stock prices are being held hostage by the next earnings announcement. 2) There are few money managers who will be aggressively putting money into the market until they see some fundamental evidence of earnings increases or an improvement in the economy.

The big problem the markets have right now is that particpants want to see tangible proof that the Fed's handiwork is filtering its way into eoconomic reports or being made apparent in increased orders at publicly traded tech companies, and, that simply hasn't happened yet.

In terms of price swings, the major indexes might have already used up most of the volatility for the week but this market can surprise anyone. Since the bear market in the Nasdaq began, the past four Triple Witch Fridays have not been kind to the major indexes. Here's a list of Triple Witch Fridays and price performances for the S&P 500 and the Nasdaq:

Mar. 16, 2001: S&P 500, -1.96%; Nasdaq, -2.57%

Dec. 15, 2000: S&P 500, -2.15%; Nasdaq, -2.76%

Sep. 15, 2000: S&P 500, -1.02%; Nasdaq, -2.01%

June 16, 2000: S&P 500, -0.97%; Nasdaq, +0.39%

I cannot rule out a Nasdaq dip to print under 2000. Certainly, for Friday, Nasdaq prints in the 2030-2000 level are likely. The index has a price gap created by the Apr. 18 surge at the open. The price gap is 1995.91 through 1941.57 and prices could move into this area before the earnings warning season is over. (There is no rule that price gaps have to get filled.)

Usually, when a major index finishes a trading day at or near the lows of the session, any opening strength (I mean right at the open) is a false move which runs out of momentum within 30 minutes and prices roll-over to print in negative territory. I think there is good possibility that the markets can spend much of Friday trading sideways (after the opening move).

The Nasdaq has immediate (intraday) resistance in the 2063-2079.30 area, then 2105-2124. The big resistance is 2136-2189 area with a focus 2156-2183.

The S&P 500 now has downside risk to print 1212-1184. Immediate resistance is 1235-1265. 1265-1235.

I don't think the technical condition is supportive of good gains on Friday, but it is the Triple Witch when strange things can occur. Cherney is Market Analyst for Standard & Poor's